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Consider ONE area of the module (forecasting / capacity / inventory / scheduling etc). What is “Best Practice” in this area? Critique an area of an organization you are familiar with against this best practice.
Forecasting can be defined as the process of using historical information in determining the direction of future trends. The present report is designed to provide deep knowledge about the use of forecasting in logistic operations management of BreadTalk Group Limited which is a listed bakery based entity of Singapore (Mentzer, Stank and Esper, 2008). This is the largest food production company and major products of the company are: bread, cakes, buns and pastries etc. The company was established in July 2000 and it operates a chain of retail outlets with the help of its subsidiary BreadTalk Pte Ltd. The company has a chain of about 40 outlets in Singapore. Various kinds of methods and techniques of forecasting will be critically explained in this part of the module.
Forecasting is the important activity of the company that is related with the use of historic data to determine the direction of future trends. In addition to this, it is utilized by companies to determine how to allocate their budgets for an upcoming period of time (Stevenson and Sum, 2009). BreadTalk uses this in business planning and production, and hence, it can be said that this is the major part of logistics and operations management. This is utilized for making effective decisions and minimizing future uncertainties for ensuring resources that are readily available from the supply and demand perspectives.
There is no perfect technique and method in the market which is 100%accurate. However, best and suitable tool of forecasting can be selected in order to reduce uncertainties and making effective planning for future logistics operation management of BreadTalk (Bowersox, Closs and Cooper, 2002). Hence, it can be said that best practices can be defined by selecting best and suitable techniques which have the ability to respond with the changes to minimise wastage in terms of time, cost and materials and improve optimisation.
Normally, there are two kinds of concepts in operations management forecasting such as qualitative and quantitative. Qualitative approach is utilised in long term strategic planning while quantitative techniques are applied for short term decision making and planning. Both the approaches can be explained as below (Kleindorfer, Singhal and Wassenhove, 2005).
Panel approach: This is one of the famous forecasting concepts, in which focus group allows all ideas from the business leaders to contribute freely and openly in forecasting and business decision making. Furthermore, panel method is the iterative group procedure that allows experts to make forecasts without meeting face to face (Schönsleben, 2007). This is the simple process in which several experts come together in order to predict particular operation.
Delphi method: This is generally utilized formal tool to decrease individual influence, deploys utilising questionnaires or emails to the business experts. A centralised board will collectively crop, summarise, and response the data anonymously. This is one of the best and effective methods of forecasting. Generally, it is simple and economical way of forecasting. Delphi technique can be utilised by BreadTalk in order to estimate demand of products of it, that will be helpful in future operations planning and controlling (Bozarth and Handfield, 2008).
Scenario planning method: This method is a different compared to Delphi method and Panel concept. This is focus on the long term forecasting, which will advise a series of future developments with adverse risks taken into consideration. This is very effective way of generating priority list of future developments and it is also helpful in implementing the plans in the logistic operations. Managerial team of BreadTalk can use this technique for estimating future growth and developments, which will be helpful in achieving goals and objectives of the entity easily (Mc Farlane and Sheffi, 2003).
Time series analysis: It is one of the most popular tools of forecasting, that examines the pattern of the past behaviour of a single phenomenon over time taking into account reasons for variation in the trend in order to forecast for future behaviour. It is the best and effective way of estimating the future on the basis of time horizon, capability of analyst, forecasting budget capacity, availability and accuracy of the data. Generally this is utilized for long term decision making and planning (Leenders, Fearon and Johnson, 2001). However, it is based on past data, and in the present high competitive era, future cannot be predicted on the basis of past information. There are ranges of market factors that can influence the decisions of management such as attractive promotions and sales activities, prices changes, competitive strategies etc. Finally, it can be said that BreadTalk can use this approach only for short term operational decision making. For example, association has forecasted its price of coffee products for next month by using time series analysis. But 3 new competitors have been entered in this sector (Vissers and Beech, 2005). In this kind of situation company must decide prices on the basis of strategies of competitors rather than time series analysis. In addition to this, for better forecasting accuracy for time series evaluation, the predicting technique may comprise of simple moving average which is easy and quick to calculate.
Causal modelling technique: This method describes and evaluates the complex cause and effect relationship between the key variables. In addition to this, it is an abstract model which describes the causal mechanisms of a system. In technical language, it is the model that is based on the assumption that future value of a variable is a mathematical function of the values of other variables. This is utilized where sufficient historical information is available and the relationship or correlation between the dependent variables to be forecasted and associated independent variable is well known (Altay and Green, 2006). Furthermore, this tool is an assumption of a reason why a product will be in demand in future. This technique is helpful in finding out the major factors that can influence the demand and supply in the near future.
Simulation: It is the imitation of the operation of a real world process or system over time. The action of simulating something first needs that a model be created and this model shows the major characteristics or functions of the selected physical or abstract system or process. In the logistic operations management of BreadTalk, simulation technique of forecasting plays very significant role in developing the effective model (Slack, Chambers and Johnston, 2009). This is based on various kinds of unique techniques, expertise and other technologies such as computers etc. Finally, it can be said that this is the modern technique of forecasting.
Generally, estimation which is subjective to type of goods are divided into three categories such as short term – stock management like procurement and resource levelling, medium term capacity management purposes like quality control, sales and production planning and long term strategic management purposes like new facility, decision making etc (Pagell, 2004). All these three types of forecasting can be explained as below in order to understand this concept easily.
BreadTalk's long term forecasting
Consumer satisfaction is one of BreadTalk's six strategic thrust and also consumer intimacy and forging partnership as part of the eight core competencies. BreadTalk is one of the most emerging and fastest growing entity of FMCG sector. The major vision of it is to become global FMCG entity and food production group. The mission of the entity is to bring value to their consumers and partners by delivering total integrated quality products and services (Kovács and Spens, 2007). The management team of the business regularly understands the present requirements and future plans of their consumers in order to deliver high levels of consumer satisfaction with the help of value creation, quality of products and services. BreadTalk expects another challenging year that could see it undershoot its long-term targets again, after pressure on prices in Europe and weaker emerging market demand slowed sales growth to 4.6 percent in 2013 (Chandes and Paché, 2010).
BreadTalk's medium term forecasting
The management team of the company must use medium term forecasting and need sales and marketing, production planning and quality control sections to have an interaction to make effective decisions based on forecasting data for future budgetary plans. The entity expected to deliver the best quality food products to the society by using effective international supply chain management. The entity will provide coffee products with the best sales and marketing strategies, normally they will sale their products with lower prices in order to get competitive advantage (Christopher, 2012). Production plan of the business is dependent on sales forecasting and demand forecasting of the entity. For example, company is estimating low demand in the year 2013 and hence, the production and operations department of the business will perform according to its demand and sales information.
BreadTalk's short term forecasting
There are ranges of elements in the company that need short term forecasting for refining the existing plan based on the present situation and data such as production scheduling, workforce levelling and procurement (Chase, Aquilano and Jacobs, 2001). This is very significant task of the management in order to achieve long term aims and objectives easily. These inputs transforms estimation to strategic decision in the complex production world to align and tailor the manufacturing scheduling closer to the actual demand of society. Project management techniques and backward planning can be utilized for starting off with ultimate goals and objectives. The short term forecasting plays very significant role in order to achieve long term targets. Furthermore, it is done on the basis of long term and medium term estimation (Stock and Lambert, 2001). On the basis of forecasted sales data, production schedule will be created. On the other side, quality of the products and services will be also managed on the basis of long term forecasting. There should be accurate number of employees recruited in order to produce forecasted sales and fulfil demand.
BreadTalk have ranges of benefits of the forecasting and techniques of estimation as it is helpful in making effective and optimum decisions for future with the valuable information. In addition to this, it is also helpful in keeping the consumer satisfaction high by facilitating what they desire and when they desire (Dornier, Ernst and Kouvelis, 2008). If company uses best and effective forecasting tool, then mistakes of past does not transfer in the future and this kind of action will be helpful in reducing repetition of mistakes. Furthermore, this is helpful in looking beyond the future to foresee present market changes and new market opportunities to attain sustainability, saving employment costs to achieve maximum effectiveness and efficiency of productivity level.
Risk of obsolescence can be reduced by decreasing cost of stocks by understanding the resource level at the given time. On the other side, company can minimise operational losses by understanding the seasonal trend in reducing sales (Roth and Menor, 2003). The regular enhancement, expansion and growth of the business can be achieved with the help of effective forecasting. This is helpful in estimating future opportunities and threats for the business and then company can take right actions in order to reduce issues by making effective strategic decisions. Finally, it can be said that there are ranges of advantages and benefits for BreadTalk, if this utilize forecasting tools for their business (Langabeer, 2008).
The above task represents that there are ranges of benefits of forecasting for the business entity. However, forecasting includes ranges of challenges also. The method shown above required variety of experienced personnel in order to predict future. This kind of technique may be very costly as it requires high level of investment. In addition to this, many methods are based on past data and information and if the sources of information have disparity or inaccuracy, then it may result in inappropriate planning (Makridakis, Wheelwright and Hyndman, 2008). Financial planning and management is the major task of the business and there are ranges of organizations that cannot invest high amount of money in forecasting and estimation.
There are ranges of external factors that may influence results of forecasting and estimations. Customer perceptions and fashion are the major elements that may change in very short time period in this innovative market. Hence, this will affect negatively on forecasting. Furthermore, government policies and political changes may create big challenge for the multinational companies like BreadTalk. For example, if government of any nation restrict company to supply its products in particular area, then it will reduce demand of the entity and finally forecasting will be failed. Another forecasting challenges is development of new product and technology from competitors into market. It will affect the sustainability of the association (Hahn, Meyer-Nieberg and Pickl, 2009).
On the basis of above critical evaluation of forecasting, it can be concluded that time series analysis is one of the best and suitable techniques that can be utilized by BreadTalk for estimation. This is helpful in logistics and operational management of the business (Bowersox, Closs and Cooper, 2002). The major problem of this technique is that it is based on past data and in the condition of incorrect past information, result will also be incorrect (Prideaux, Laws and Faulkner, 2003). On the other side, innovative market and new technology development are also big challenges for the business.
Explain the logistics and operations management challenges faced by companies operating either in Singapore or in your home country. How well does your company respond to these challenges? What changes have there been in the past 15 years that have changed the challenges in logistics and operations management? What changes would you like to see in the external environment or the company response?
BreadTalk produces food products and it must deliver these goods on right time to society in order to achieve objectives. The present report is designed to identify the challenges faced by the company in logistics and operations management activities. It also focus on the question how does BreadTalk respond to these challenges. The internal and external factors that influence the logistics and operations management of the business will be discussed in this study (Zhang, 2004). Furthermore, there are ranges of way to reduce challenges, and these actions will be identified in the present research report.
Logistics and operations management play very significant role in success of the entity. The objective of both these activities is to produce the appropriate products and services in the right quality and quantity and to distribute them to the right place at the right time, thereby making the greatest contribution to the organisation (Alfares and Nazeeruddin, 2002). Furthermore, logistics and operations management covers whole supply chain from the acquisition of raw materials, through production, to the point of consumption. Hence, it can be said that this is one of the major task of the business that decides future success or failure. Each and every sub tasks should be managed effectively in order to reduce costs and improve profitability (Soman, Zareipour and Mandal, 2010).
Supply chain management is one of the best part of logistics and operations management. The major problem facing the BreadTalk team and total logistics consultants was to develop a meaningful model through which they can really understand the pros and cons of each option which was available. This already complex situation was made even more challenging due to the diverse and expansive nature of products range of BreadTalk and large number of end markets (Weatherford and Kimes, 2003). While the York, Bardon and Scunthorpe sites handled foodstuffs comprising water, confectionery, cereals and coffee, the latter also coped with the huge seasonal demands for confectionery products during periods such as Easter and Christmas (Araújo and New, 2007).
To add to the complex picture, Scunthorpe also used different technologies to service the international export market, dispatching product to Europe and further afield via deep-sea routes. Hence, it can be said that the association is facing various problems in logistics and operations management tasks. During 2002, BreadTalk sold a big proportion of its food business to Premier foods. This caused number of issues and challenges for the supply chain and major one was the under utilisation of Bardon Distribution Centre (Araújo and New, 2007).
Transportation is one of the basic problem of logistics and operations management because every activity of the business depends upon transportation facilities of the nation. Government policies and involvement in infrastructure and transportation play very significant role in logistics and operations management. There may be the problem of getting raw material on accurate time due to weak transportation facilities (Armstrong, 2006). This kind of delay will influence production process and supply chain of the business.
Company cannot deliver food products on promised time frame due to low availability of transportation services and infrastructure facilities. High traffic on roads, human traffic in urban areas, road construction work etc. play very crucial role in getting raw materials on accurate time and delivering finished good on decided time (Stock and Lambert, 2001). According to various studies, it can be said that BreadTalk is facing these kind of problems in its logistics and operations management activities (Alfares and Nazeeruddin, 2002). This will also affect other operations works such as production, inventory management, sales and marketing, quality management, human resource management etc.
How well does BreadTalk respond to these challenges?
BreadTalk is managing its logistics and operations management activities in very effective ways in order to reduce various challenges. The financial management team of the business is very effective which helps the entity in buying new trucks that will eliminate the frequent breakdowns in transit and minimize delays. The company is using variety of ICT tools and techniques such as vehicle trackers, satellite navigators and mobile telephones which are helpful in tracking locations of vehicles (Wood and Lettenmaier, 2006). This type of task is helpful in reducing time of the transportation and cost of the transportation. Likewise, GPS system technology helps the entity in finding out various kinds of safe and easy routes for transport (Chandes and Paché, 2010).
This will be helpful in reducing various kinds of issues such as delay in getting raw materials, delays in delivering finished products, managing and controlling the level of inventory. Hence, it can be said that this kind of actions will improve capability of logistics and operations management of the entity. In the year 2005, BreadTalk introduced Project T- Shirt that resulted in its logistics securing the control and management of despatches from Bardon DC via third party logistics provider. This will be helpful in improving efficiency within its transport network and more opportunities for load fill (Mentzer, Stank and Esper, 2008). The entity is using very effective business strategy in order to overcome the different challenges. The organisation believes in developing excellent relationship with its channel members and logistics.
It is helpful in distributing the needed products in the required areas on predefined time. BreadTalk's distribution set up is synced with its manufacturing system therefore company does not have to manage the stock of goods for a longer period of time (Vissers and Beech, 2005). This kind of strategy has saved the organization on financial side; moreover the association have been able to provide the product to the market at demand. Another strategy utilized by BreadTalk for its vendor management is Just In Time concept (Stevenson and Sum, 2009). The managerial team of the association utilizes JIT techniques in their raw material procurement and this kind of tool will be helpful in managing other operations of the company such as production, human resource management etc (Dornier, Ernst and Kouvelis, 2008).
The supplier of the entity believes in policies and process of the organisation and entity also believes in its suppliers, and this will help in managing effective relationship with them which will be helpful in getting inputs on accurate time (Bowersox, Closs and Cooper, 2002). In addition to this, company is using various modern and innovative information technologies that are helpful in sharing and evaluating significant data regarding logistics and operations management. There are ranges of software that are used by the association in order to manage tasks related to production, sales, distribution etc. In order to improve infrastructure facilities, the association is paying sufficient amount of tax to the government. It also have good relationship with various departments of the government and politicians which will be helpful in infrastructure services in the nation (Kleindorfer, Singhal and Wassenhove, 2005).
The company is also able in developing and creating better road and bridge in the most visited areas in order to reduce challenges such as delays, weak transportations etc. The external environment of BreadTalk also play very significant role in logistics and operations management activities. The entity is the multinational organization and performing business in ranges of nations of Asia, Europe etc. This must manage its external environment in order to become successful in this high competitive and rapidly changing economy of the world (Bowersox, Closs and Cooper, 2002). Presently, ranges of new competitors are coming in food production sector that are creating high level of competition for the association. For example, there are limited number of suppliers of raw material in the market and if new participants will be coming in this market, then competition will be increased in terms of suppliers (Makridakis, Wheelwright and Hyndman, 2000).
This will lead in reducing availability of raw material for BreadTalk and then logistic and operation section of the company will face big issues. In addition to this, different nation has different kinds of infrastructure facilities which influence business operations of BreadTalk. For example, the entity can deliver their products to consumer quickly in nation but they can not deliver it in the Pakistan as this includes low transportation facilities (Kleindorfer, Singhal and Wassenhove, 2005). Various legal, government, environment, physical environment of different nation also create big challenges for the association. For example, if company desires to deliver products to hill stations, then it must face various issues in transportations and other services.
The module discussed the principles of lean operations and demonstrated the use of Kanban control. To what extent can lean principles be used in your organisation / an organisation you are familiar with? Is there a place for MRP / ERP to be used in the organisation? Are there changes you could recommend to improve current methods of operations planning and control?
Lean philosophy was firstly implemented by Japanese automotive companies which has positivity affected their performance. The principles of lean philosophy focuses towards creating value satisfaction to the customers which increases operational efficiency. Further, the organization can have empowered employees by providing them tools that they need. The organization can become more cost and time efficient as the consumer can be provided with goods and better services which may leads to profitable enterprise results (Mentzer, DeWitt and Keebler, 2001). Nowadays, Lean philosophy has gained attention of many companies with the intention to create impressive performance. The task herewith presents the principles of lean philosophy and their use in the organization. The retail food industry has become more competitive therefore companies needs to adopt techniques that can help in creating superior customer value. The customers of food retailing industry are looking for the best quality products available at reasonable prices (Alfares and Nazeeruddin, 2002). The present study focuses on identifying the initiatives taken by Aldi, well-known retailing company for providing value for money to the customers. It also demonstrate how Aldi uses a lean approach in business operations so that customers can be offered with quality products at competitive prices.
Aldi is the well known retail store founded in 1913, it has been established as a reputable retailer in international markets. The organization operates in its major countries such Germany, Australia and the U.S. It has more than 7000 stores all over the world. The competitive pricing strategies of Aldi distinguished it from other competitors. Aldi is a combination of two words such as Albrecht and Discount. The company provides higher discounts to the customers to attract them. It is known for operating an “everyday low prices” policy. The organization is focused towards selling own-brand products which account for around 90pc of sales in the nation. The products offered by Aldi are of good quality and cheaper than other competitors. The operational efficiency of business entity enable it for providing good quality products at lower prices (Bozarth and Handfield, 2008). The corporate entity is efficient in providing the best services to customers as there is effective relationship between inputs and outputs. The major aim of operational efficiency is to reduce cost in all areas of business. Aldi has minimised the cost through saving time, space, activity and energy (Langabeer, 2008). The business entity uses principles of lean thinking that enables company to achieve operational efficiency. Objectives of the supermarket company is to provide value and quality to the customers. The use of principle of lean management have enabled organization to cut the cost of production and providing low cost products (Kovács and Spens, 2007). The saved money is invested in projects to achieve growth in business. The organization has adopted lean thinking as a continuous process so that business objectives can be achieved.
The principles of lean management provides various opportunities for business to improves the operational process(Skiff, 2009). This philosophy emphasizes on creating more value for customers while using limited resources (Blackburn and Scudder, 2009). Following points explains the principles that are involved in implementing lean process improvement:
Satisfaction of customers: The ultimate goal of lean management is to provide value satisfaction to the customers. The operations of business entity have to focus towards customers as it has to offer the prices and services as per requirements of customers (Anderson, 2006). The organization can provide it through offering quality of services at competitive prices (Langabeer, 2008).
Identify the ways to get work done: The second principle of lean management focused towards figuring out the best way to conduct operational activities. Before stating the work, the management needs to identify the efficient way to perform the activities so that organizational goals can be achieved (Chiang, 2012).
Eliminate inefficiencies and waste: The principle of lean management is to reduce the wastage of resources so that efficiencies can be achieved. It helps in creating direct value for the customers and will help in retaining them in business. The major task of lean management is to manage and improve the process to eliminate non-value-added activities. The organization has to reduce the time so that it can achieve customer satisfaction (Makridakis, Wheelwright and Hyndman, 2008).
Empowering people for operating process: Further, the principles of lean management lies on evaluating the process of value creation. The organization has to eliminate the wastage of resources and focus on continuous improvement in value. The employees who are involved in the process of value creation need to be efficient in their tasks. The major principle of lean management is to empower the people involved in operational activities. Furthermore, the management needs to ensure that improvement are made (Dekker, Fleischmann and et.al., 2004).
Continuous improvement: The ultimate principle of lean management says that organisation should implement change where it needs. The demanded changes in the process are to be introduced so that continuous improvements can be made. Further, it has to become able to replicate the process of improvements for a long-term to gain sustainable value (Kök and Xu, 2011).
Lean production is adopted by Aldi company in which the organization focuses on acquiring more profits from limited resources (Mentzer, Stank and Esper, 2008). The major purpose of using lean management is to reduce the wastage of resources and providing value satisfaction to the customers. Meanwhile, it is focused towards creating operational efficiency (Chase, Aquilano and Jacobs, 2001). Using this approach, management can reduce the waste and can use less labour, materials and time for better outcomes. Overall, it helps in reducing the cost of production. Lean production not only helps Aldi in reducing cost of operations but also it supports company in providing satisfaction to customers. The lean production of Aldi is based on following concepts :
Just-In-Time Production: It based on operational efficiency in which the materials are received at the time when they are needed. This approach helps in eliminating requirement of maintaining large inventory levels.
Total Quality Management (TQM): It is based on total quality concept in which the employees of Aldi are accountable for getting the task right for the first time. The organization is focused towards managing quality in all area of business operations (Kleindorfer, Singhal and Wassenhove, 2005).
Effective Management: The lean production concept of Aldi is focused towards reducing the time wasted on the operational activities of business. For this, the company has appointed multi skilled and talented workforce (Kovács and Spens, 2007). It helps in completing the task and time and providing the service to customers at desired time.
Continuous Improvement: Using lean production approach, the organization has developed the quality working place in which all the employees are committed for making improvements to quality (Makridakis, Wheelwright and Hyndman, 2008).
However, it has been seen the lean production concept is mostly used by manufacturing companies but now they are applied in service organisations. Aldi has applied all the principles of lean production in all the areas of business. This approach is stated with logistics and supply chain management of the organization (Pagell, 2004). For an example: Aldi sourced more than 60% of its vegetables and fruits in local areas in order to reduce the cost of transportation. It can be said that lean approach of business entity is focused towards the time management. In addition to that, employees of Aldi are provided with effective trainings for time management. This enables organisation to reduce wastage of resources and cost. The trainings provided to the staff help them in performing various task at the stores (Schönsleben, 2007). It also helps management in managing the requirements of staff. The workforce of Aldi can get knowledge pertaining to task of fields and will improve their skills to provide higher level of customer service. In addition to that, organization can reduce the cost of human resources as fewer staff will be required to perform various duties at the store(Martie ,2013).
The time based management approach is applied to the product range of Aldi. Aldi offers fewer variations in the products to the customers at the store. On the other hand, the rival companies are offering larger variety of product including brands, property and packaging (Stevenson and Sum, 2009). The fewer varieties offering enables Aldi to purchase huge quantities. Hence, advantages of economies of scale have been achieved by the organization. Having such economies of scale, it can reduce the cost of production. Being cost effective, Aldi can offer the product and services at competitive prices to its customers. To display the product, the company needs to have smaller place hence the size of stores can be reduced. It is focused towards supplying the products as per market demand (Vissers and Beech, 2005).
Just-in-time (JIT) approach is used by Aldi to manage the operations at its stores. The particular approach is used to hold the inventory that is needed by the organization. It has been identified that the organization is dealing in expensive stock. Hence, it is needed to have the stock that is required to conduct the activities. The stock is purchased by the organization at any given time (Prideaux, Laws and Faulkner, 2003). In case, the organization reduces the stock levels then it will help in improving working capital. From the analysis, it can be said that Aldi is not focused towards investment in stocks but it is focused towards holding it for as short time to reduce the cost. It represents that organization reduced its warehousing costing by investing less on maintenance of warehouses. In this way, the payment made to staff for monitoring the warehouse is to be reduced (Wood and Lettenmaier, 2006). As the stock arrived in the store, the management of company focused towards reducing the cost of holding and managing the stock. As soon as the stock entered in the stores, it is being displaced in ready cases so that cost can be managed. Further, it is displayed in the shelf for display to customers. It can be referred to as an efficient way of managing the large volume of products in a quicker and easier way. Aldi is using TQM approach that helps in increasing quality in the organization. The organization has created strong business relationships with suppliers. Through managing effective relations with the suppliers, company has improved its product offerings (Weatherford and Kimes, 2003). The use of such approach enables organization of meet international quality standards. It provides the information related to nutritional process of products so the customers can be provided with healthy products with assurance. All the products offered by the organization are properly labelled so that customers can get informed about choices. These all initiatives taken by Aldi has helped in continuous improvement culture. It has been seen that Aldi has adopted distinguished approaches related to retailing business. The operations of business entity are focused towards providing quality products to the customers so that they can be availed with value for money (Zhang, 2004). At each operational level, Aldi focuses towards ensuring efficiency. The operational efficiency of business entity is showing its core values of simplicity, consistency and responsibility. While having lean approaches, Aldi is offering higher quality products to the customers at reasonable prices.
In addition to that, organization needs to improve its practices and for this, it can use Kanban approach. It is called as nervous system that helps management in practising lean production. It will help in determining the processes production quantities. This assists in conducting JIT production and ordering systems so that cost can be reduced against the volume of stock. The organization needs to improve the JIT technique while using kanban's "pull" system (Soman, Zareipour and Mandal, 2010). It creates greater flexibility in the production that is based on estimated number of expected sales. JIT/kanban systems will help in eliminating problem associated with overproduction (Weatherford and Kimes, 2003). JIT/ kanban systems supports Aldi for reducing amount of necessary in-process and post-process inventory so that the damages in the products can be reduced at the time of handling and storing. It also facilitates worker-lead process improvements so that they can be motivated for making improvements in products; then there will not be any excess inventory that is to be sold. It will be a cost effective way for the business entity through which the organization can reduce the increased energy use that is associated to transport and reorganize unsold inventory. In the organization, it has been seen that JIT is not implemented in the supply chain management which is a loophole in operational efficiency (Stock and Lambert, 2001). The use of JIT will help management in reducing environmental impacts from overproduction, damaged goods, inventory storage and so on.
Principles of lean philosophy focuses towards creating value satisfaction for customers. The above task explains the principles of lean philosophy its use in Aldi. It has been identified that retailing companies need to adopt techniques that can help in creating superior customer value. It also identifies the initiatives taken by Aldi, The task concludes that the organization needs to improve its practices by using Kanban approach. It will help in conducting JIT production and ordering systems so that cost can be reduced against the volume of stock. It will be referred to as an efficient way of managing the large volume of products in easier manner.
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